It looks like most builders aren’t buying plywood, concrete, bricks and other construction supplies from Amazon. Or even Walmart. They are doing so at Home Depot — and that’s why it is a bright spot in an otherwise gloomy time for traditional retailers.
Home Depot reported earnings and revenues that topped Wall Street’s forecasts Tuesday. The company also raised its profit outlook for the year. And it reported a same-store sales increase (stores open at least a year) of 5.5% overall and 6% in the US.
Home Depot (HD) stock rose 2% in early trading to a new all-time high. The stock is now up nearly 20% this year, making it one of the top performers in the Dow this year — along with Apple (AAPL, Tech30), McDonald’s (MCD) and Visa (V).
Home Depot is benefiting from a strong housing market. So is its rival Lowe’s (LOW), which will report its latest results on May 24. Shares of Lowe’s are up 20% this year as well.
During a conference call with analysts Tuesday, Home Depot chief financial officer Carol Tomé said that the housing market continues to grow despite mixed forecasts for the overall economy.
Housing prices have been steadily on the rise, which motivates prospective sellers to do home improvement projects to maximize the sale price for their house.
Home Depot isn’t ignoring the digital opportunities that have helped Amazon and Walmart either. Quite the contrary. Home Depot CEO Craig Menear said during the conference call that online sales rose 23% in the most recent quarter.
But it clearly helps that both Home Depot and Lowe’s are specialty stores that sell things that many people still want to buy at physical locations, especially professional builders and contractors.
Menear added during the call that sales to its "Pro" customer segment continue to outpace that of average DIY customers looking to fix a broken closet door or leaky faucet.
Still, Home Depot remains one of the exceptions in an otherwise dismal environment for many retailers.
Teen apparel retailer Rue21 announced Tuesday it was filing for bankruptcy protection, joining a long and growing list of retailers that have been forced to go the Chapter 11 route, such as Aeropostale, Wet Seal, Pacific Sunwear and The Sports Authority.
Abercrombie & Fitch (ANF), once one of the hottest apparel chains for young adults, is looking to sell itself to a buyer as its sales continue to fall.
And two other retailers reported weak sales and gave sluggish outlooks on Tuesday — T.J. Maxx and Marshalls owner TJX (TJX) and Dick’s Sporting Goods (DKS). Shares of TJX fell 4% on the news while Dick’s stock plunged 12%.
That makes the gains for Home Depot on Tuesday all the more impressive. The company’s signature color is orange. But perhaps Home should change that to green instead. It’s one of the few traditional retailers not in the red lately, after all.